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What's Helping Five Below (FIVE) Trade Ahead of the Industry?

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A glimpse at Five Below, Inc.’s (FIVE - Free Report) share price movement reveals a rough 35.7% rise in the past six months, comfortably outperforming the industry’s growth of 9.3% and the S&P 500’s 3.2%. Further, the stock is trading close to its 52-week high of $101.77 and there is a possibility that this Zacks Rank #2 (Buy) company will cross the mark in the near term. So, let’s check out the factors driving it.

Impressive Comps Performance

Five Below has been witnessing positive comparable store sales (comps) growth for six straight quarters. Evidently, comps rose 1% in fourth-quarter fiscal 2016 and 2.6%, 9.3%, 8.5% and 5.9% in the first, second, third and fourth quarters of fiscal 2017. Comparable sales increased 3.2% in the first quarter of fiscal 2018 and were within the company’s previously-provided guidance of 3-4%. Five Below now envisions fiscal 2018 comparable sales growth of 1-2%.

Focus on Pre-Teen Customers

Five Below’s primary focus on teens and pre-teens helps the company enhance customer base by attracting shoppers. Further, the company is known for its impressive range of merchandise and it is committed toward making innovation and refreshing its product range in line with evolving consumer trends. These factors combined with the company’s pricing strategy of selling products for $5 or below enable it to cater to demographic shoppers.

 

Rationale Behind Store Opening

Apart from these, the company is committed toward expanding its store base, as well as enhancing in-store experience. The company believes that expanding scale helps it gain access to renowned shopping centers, capitalize on emerging market trends and increase brand value.

In fact, the company’s store remodeling drive has been boosting comps performance. Incidentally, Five Below launched 103 new stores in fiscal 2017. The company plans to open 125 stores in fiscal 2018, with 50% expected to be launched in the first half. Also, it is focused on expanding store base and targets to set up a network of more than 2,500 stores by 2020.

Wrapping Up

We believe that Five Below’s wide assortment of trending merchandise, solid in-store and online experience along with favorable pricing strategy are likely to remain major growth drivers. Further, the company is focused on achieving an efficient cost structure, solid average net sales per store, supply-chain initiatives and economies of scale.

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